Crappy Bounce; Then We Fell Apart

I am somewhat bewildered.

The markets did nothing to help themselves from a technical perspective today. The good news is that we managed to take another shot at the 14-day simple moving average and hold a support line that's making some higher lows. Well, barely higher lows, but if you squint, they are there. It doesn't fit perfectly with the traditional definition -- then again, what's traditional or perfect these days? -- but the SPY seems to be shaping up with an inverted cup-and-handle pattern.

The SPY is banging down near support once again today. In addition to that, there isn't any relief from the ADX, RSI, or the stochastics. They all shout stay indoors. It's rough outside. You may be better off skinny dipping in the Gulf of Mexico, then jumping in these waters if the current support line breaks.

The longer we can remain in this range, the better off the markets will be. Weak hands can rotate to strength, and a stronger level of support can be created. A close over the 14-day SMA for two days in a row would certainly strengthen the bull's case, but for now, the technicals still don't say 'buy.'

The energy sector has certainly been rife with challenges lately. One name of interest should be XOM. Even though shares broke down from a long uptrend at the beginning of May, then fell further out of a bearish wedge in mid-May, there are signs of life. The stock is in a sideways pattern, with clearly defined support and resistance. The positives are the bullish divergences seen in the RSI and stochastics readings. Also, the ADX is starting to turn over and become less bearish. XOM may set up as the energy stock to own once this sector starts to turn, or even before it turns. A breakout over the current resistance should be a clear indication to start building a long position.

I have to say that, emotionally, it is hard to be short BP and APC. These are big companies that employ lots of people. They are companies that help meet the energy needs of our country. However, they are also responsible, along with RIG and HAL, for what will turn out to be the worst ecological disaster of the past 100 years. And certainly the worst, by far, in our country, so far. Whether you hate the company or believe that some people are pushing too hard, one must leave those emotions at the door when getting long or short here.

Beyond retail, there was very little positive to take from the day. I suspect we will see some dead-cat bounces in names such as BP, APC, and the euro. Many charts are shaping up like SPY and XOM. For those looking at the concept of the collar, there are clearly defined lines for calls and puts at the moment. As we head to the end of the week, I feel we need to see some form of a push higher tomorrow; otherwise, Friday may not be worth getting up for......